If you have an existing credit facility with your bankers, there is an increasing likelihood that you will begin to default and the banks will start calling. If you do not have any existing facility chances are very high that you will need one, to cushion you against the uncertainties that abound, but chances are that most banks will not be keen to lend, with most waiting to cash in on the expected government rush to borrow from the markets, so as to plug the budget deficits.
But Anne Juuko, the new Chief Executive Officer of Stanbic Bank, Uganda’s largest bank, by assets, lending and profitability says, if you have a facility with Stanbic Bank, you don’t have to run. She says that this is the time, to pick your phone or head straight to the bank and talk to your banker because they are ready to sit down with you and craft a solution that in her words, will “walk you through and deliver you on the other side.”
“We have put together a robust credit relief package that includes among others, moratoriums, interest deferrals among other things. We are making a bespoke plan for each of our clients so that we can understand the issues they are going through and create a solution that takes them through to the other end,” she says.
Juuko who was speaking to media and analysts on Thursday, March 26th, 2020 via a web call, said that the bank’s credit relief programme is being custom-designed to every client’s situation in line with the guidelines by the central bank.
“This is a plan that is in play and continues to change given the fluidity of the situation at the moment, but we are undertaking a discussion with our clients,” she said.
In an earlier media statement released alongside with the bank’s published results, Juuko reiterated: “Our aim is to ensure we see that their businesses are sustained and the impact on the economy is minimised,” she said adding: “As Uganda’s largest bank by assets, we are at the heart of the economy and it is our duty to ensure we support our clients to keep their businesses and lives on track.”
“We are partnering with Bank of Uganda and Uganda Bankers Association to transmit the monetary policy interventions that were announced in the Governor’s address to cushion against the macroeconomic shocks as a result of the pandemic,” she said in the statement.
Stanbic is well-capitalized and resilient
Surrounded by Patrick Mweheire, the bank’s former Managing Director until the end of 2019 and Samuel Mwogeza, the bank’s Chief Finance Officer, a confident Juuko told the media and analysts that the bank is very well capitalised, in many cases way above the regulatory requirements and was therefore in a position to support its customers withstand most of the COVID-19 knock-on effects and put them on the path to recovery.
“Our capital adequacy is at 15.85% versus the regulatory limit of 10%. We are well above all the regulatory limits and we have sufficient buffers to see us through and wither all the shocks that may come our way. The same is true for our total capital; while our regulatory limit is 12%, we are at 18.3%,” she said via the weblink.
She also said that much as industry level asset quality is expected to deteriorate with Non-performing loans going up- (up to between 7-10% according to Mweheire), Stanbic Bank was well insulated.
“If you take our 2019 number, we were at 4.3% compared to our risk appetite which is at 6.5%. Our NPL coverage ratio as at the end of 2019 was at 91% up from 65% in 2018,” she said.
She also said the bank was managing its costs well – with a cost to income ratio of 49%, thus a return on equity of 25%- the highest amount amongst the domestic systemically important bank (DSIBs), giving the bank sufficient room and enough buffers to withstand both the COVID-19 crisis and any possible electoral cycle challenges, ahead of the presidential polls next year.
She also said that the bank was very liquid with liquid assets to total deposits ratio of 55.3%, which is more than double the limit of 20% as required by the bank of Uganda.
“Our Gross Loans to Deposit ratio is 62% while the regulatory limit is 80%. From a market sensitivity point of view, our forex loans to forex deposits is at 60% while the regulatory limit is 80%. The percentage of forex loans to gross loans is 32.8%- below the regulatory exposure limit of 40%. From a resilient point of view, we are taking the time to assure our partners that we have sufficient buffers to be able to work through this crisis and be able to continue to deliver value in 2020,” she added.
Responsible lending in the face of COVID-19 pressures
Asked if the current crisis may force the bank to increase its interest rates to factor in the increased risks, Mweheire, the Stanbic Bank Managing Director until the end of 2019 and now the bank’s Regional Chief Executive Officer said that the bank’s pricing of credit has been “clearly, consistently and transparently” pegged onto the Central Bank Rate.
Irene Mwoyogwona: Beyond the Numbers – How Pride Bank's Award-Winning CFO Combines Profitability and Social Impact“The CBR is the only metric that we use. There will be no other metric. We will continue benchmarking on the CBR. If they (BoU) cut, we will cut,” he said echoing that the bank’s fundamentals remained strong, even in the face of COVID-19.
“We have a loans-to-deposit ratio of 63%, so we have a big headroom for new credit. We are open for business and COVID-19 is not going to take away our main model of doing business. We won’t adopt a new COVID lens for borrowers,” he said, adding: “Bottom line, we will always look at the merit of the applicant,” he said.
Asked about what sectors have been hard-hit and have reached out for help, Ms. Juuko said that generally the stress was evenly spread across transport, agriculture, tourism, power, and industry- but that tourism was the worst hit.
“Tourism is where we are seeing a lot of heat coming from,” she said.
She said that based on clients that have approached them- the kind of deferrals being asked for by clients, averaged between 3-6 months but the longest is a 12 months request for deferment of repayments of the loan principle.
“That is the longest we have seen- but is an individualized programme that takes into account the client and sector,” she said.
Samuel Frederick Mwogeza the bank Chief Finance Officer, said that the bank is intervening this early to ease on cash flow pressures on clients so as to stop performing loans from degenerating into NPLS.
“Yes there will be an impact on the present value of the loans, but it is the right thing to do,”
Health and safety is a top priority
In an earlier statement released by the bank, Ms. Juuko, reiterated that the bank was doing everything possible to ensure the safety of their staff and clients while at the same time enhancing uninterrupted service and convenience.
“As we face the world’s most serious health emergency, Stanbic Bank recognises the gravity of the situation and would like to extend our full support and care to our customers, staff, communities and all stakeholders during this time,” she said adding: “To minimise any infections, we have put in place the necessary health precautionary measures by placing sanitizers at the various touchpoints including ATMs, Cash Deposit Machines, branches and Stanbic offices across the country.”
She reassured the bank’s customers and the public that Stanbic was deploying its full suite of digital services to ensure that banking needs are fully catered for, in a way that minimises any distress during this interlude.
“Our branches will remain open with enhanced safety measures however, we would like to encourage you to use digital services as much as possible. Stanbic Bank has waived all charges on our digital banking platforms. Customers can now enjoy transacting free of charge on a wide range of our digital platforms including; our Stanbic App, Online Banking and Mobile Banking for day to day payments and account to mobile money transactions,”
“In addition to that we are issuing free VISA Debit Cards for existing customers and free card replacement to make sure that anyone who can transact without coming to the bank is sufficiently enabled to do so,” she added at the conference call.
“From a digital point of view, we are using this as a chance to migrate the customers into our digital channels. Not only does that bring down our cost to serve them, but it is also a healthier way to transact, as we have learned recently,” she said.
She said that in the face of the COVID-19 pandemic, the bank had put together a UGX100 million package and was partnering with the Ministry of Health and other private sector players to support Government efforts to curb the spread and risk of the COVID-19.
“In this uncertain time, together let’s take action to control the spread of the disease and follow the guidance from Ministry of Health to keep you and your families safe,” she said.
